Halliburton and Baker Hughes Merger: What a Drag

The merger that has been going on forever in the energy sector has been extended yet again.

The deal between Halliburton Company and Bakers Hughes is still hanging on by a thread as the regulatory authorities have extended their decision making process. The regulatory authority that has been causing problems in the current deal is ACCC – Australian Competition & Consumer Commission. The deal has not been completed solely because of the ACCC as it has extended the announcement of the decision to December 2015. The oil and gas major company had initially planned on finalizing and closing the deal before the end of the current year but due to the extension made by the Australian regulatory authority, the deal seems like quite a challenge for the company. A request by both of the energy companies have been made to the United States Department of Justice (DoJ).According to the request, they want the Department of Justice to postpone its review and close it as early as possible by the December 2015. The crude oil prices, since July of2014 have dropped by as much as 50% due to which all of the oil service providers have suffered with their share price and prices per gallons. In a year, the energy major has fallen as much as 21.51% and the other energy company that Halliburton is merging with Baker Hughes has dropped by 19.35%. The crude oil prices are not the only prices in the energy business that have fallen in a year’s time, the oil production levels has fallen significantly in that time period as well. Both the companies need to take advantage of economies of scale along with probably lowering average costs to manage their expenses and in order to cut costs. There is apparently a conflict of interest among the regulatory and the energy giants. As for the regulatory authority the deal brings an added responsibility of regulating the social benefits of the deal along with its cost while for the energy service providers, there’s a good commercial prospect. One of the energy service providers, Halliburton is considered as the second largest energy company while Baker Hughes is almost on the third. If the merger is a success, this could bring a huge new entity to the market that will be a major leader and it will decrease the shares of the smaller energy companies. On the trading session that was held on Monday, Halliburton’s stock increase by 0.92%, which added the company’s shares to the gainers list. During the session, the highest level to which the share price of the energy company was seen at $38.45 and $38.35 at the lower level.

Chevron Corporation Might Be In Trouble Due To Declining Crude Oil Prices

Due to the reducing crude oil prices, which are highly unlikely to hike up, might cause Chevron to opt for internal financing.

In a year, Chevron Corporation has fallen by at least 25% and it continues to fall further as the crude oil prices remain in a downtrend. For the longest time, the second largest United States based company in oil and gas has been known as the ‘dividend machine’ but considering the current scenario, it is debatable to call it such.

Along with being called the Dividend machine, the dividend for the oil and gas organization has constantly risen in the last 28 years. For all the years, that Chevron has been considered oil and gas giant because of its robust dividend was majorly due to the prices of crude oil.

The major reason for the company to keep increasing its dividends as per barrel range was the trade from $110 to $115. Since the price of crude oil has decreased, the scenario is likely to change. Since June 2014, the crude oil prices have fallen by as much as 50%.

Due to these falling crude oil prices, the corporation’s liquidity position is being threatened along with leaving the investors confused. Stockholders now are concerned with whether to conserve more in cash but that will ultimately reduce dividends. In a last 52 week, Chevron’s stock has fallen almost 25%. The Free Cash Flow of the corporation has been in red for the past five quarters.

The stock experts at The Street have predicted that the negative Free Cash Flow of the company would likely increase in the fourth quarter of the current fiscal year. Another option for it would be to take loans in order to pay dividends but threats and problems might arise in the future because of borrowing money.

Additionally, according to news, the United States Federal Reserve is also expected to increase the interest rates. An increase in the interest rate would ultimately cause the US dollar to hike up due to which debt servicing could become expensive. However, in the past one year, the debt has increased by 39%. Furthermore, in terms of remedies, the Chevron can even look at its own asset sales, cutting costs via reducing its capital expenditures and downsizing employees.

As mentioned in the company’s earnings report for the third quarter, Chevron stated that it would keep the capital expenditures at a price of $25 billion to $28 billion, which is a decline of 25% in comparison to the same quarter last year. In the year 2017 and 2018, the capital expenditure of the oil and gas giant is estimated to be $20 - $24 billion.

Chevron Corporation Is Contributing A lot To The Australian Economy

The relationship between Chevron and Australia is going fairly well, the future seems bright for both.

Australia is one of the places that are economically benefited directly or indirectly through various projects carried on by Chevron Corporation. The mega projects and activities that the company has carried out in Australia are Grogon Liquefied Natural Gas and The Wheatstone Projects. Along with these projects the corporation has made other investments as well; through these projects, investments and activities the economy has larger benefitted.

Chevron is considered as one of the major contributors and distributors of natural gas in the country. For the development of the corporation’s Gorgon and Wheatstone projects, it has committed over $45 billion from 2009 to 2014. The oil major had further provided major employment opportunities in the country which has largely contributed to the country’s economy as well. The oil and gas corporation has managed to hire over 19,000 employees from Fiscal Year 2009 to Fiscal Year 2014. In the same time span, over $1 billion have been invested in research and development in the region.

Furthermore, Chevron has also worked towards enhancing academic education and research in the country and has contributed over $53 million so that better education can be provided in the region. It has also invested in exploration activities; the amount contributed on this cause is $1.6 billion. Through this investment, the country was able to make 24 offshore discoveries.

According to the corporation, these investments and contributions will benefit Australia’s economy from 2009 all though 2040. It is likely to contribute over $1 trillion to the gross domestic product, which could be generating $32 billion to GDP annually and along with that it could also contribute to Federal Government with an amount of $338 billion in revenue. Over the period of time, these projects could generate as many as 150,000 full time jobs for workers which would mean there will be 5000 job openings in the country on an annual basis.

Once the Gorgon and Wheatstone project is fully operational, it has the capability of producing 550 joules of domestic day daily which would amount to 50% of the current domestic gas supply in Australia. It is quite evident from all this information that both Chevron and Australia aren’t letting this partnership go easily or any time soon for that matter.

On November 18, 2015 Chevron’s stock was being traded in the market for $92.21 which showed a change of 1.30%. For the next year, the company is forecasting earnings per share of -8.06% while having a current return on investment at 6.40%. The market capitalization of the gas and oil company is 171.32 billion and the current EPS is 4.60 with a price to earnings ratio of 20.03.

Chesapeake Energy Corporation Plans To Sell Off Assets

The oil digging company is to carry out a major plan to sell of its assets to cover the losses it has so far made due to the downturn in the energy sector.

Chesapeake Energy Corporation has recently announced that it will be doing a major selloff of its assets soon, which is being taken as a much needed step by the oil giant. The energy sector on a global level has been experiencing some major downs lately which have made all the related companies in the industry think of quick strategies to overcome the losses they experience over the course of time. In the same way, the oil service providers have also carried out some important steps to cover the losses, among which selling off its assets has emerged to be an important one by the giant.

Following the decrease in oil prices, the decrease in the services provided by Chesapeake has also been observed. According to related report, the oil company is currently working towards cutting down its costs along with observation of suspension of dividend payment to save itself in this difficult time. However, the strong earnings report that was recently reported by the oil digging giant cannot be ignored, as it managed to beat estimations by a huge difference.

The estimate for EPS was made at -$0.136 by the analysts on the Street, but Chesapeake stock reported the earnings per share to come around -$0.050 which was much better than the expected loss. However, the revenue reported by the company almost missed the predictions but managed to sustain its value on the index. The giant might seem to be doing well on the front, it cannot be denied that there are some persistent issues erupting from the oil services provider’s end which majorly can be seen in the capital structure on which the whole business plan of the oil diggers stand.

Furthermore, analysts at the Credit Suisse equity giant have advised the company to start working on deleveraging its structure, which is the only solution that can be thought of that will help the oil giant the most. This is why the company has decided to start selling off its assets to begin levering off the $10 billion debt it is currently in.

This debt will not be handled only by selling assets but by also cut down on excessive spending and to carry out more projects in joint collaborations with other companies. The oil company believes that these are some of the major steps it can take to sustain the downing position it has been experiencing for some time now. As per report, it is also looking to sell off major parts of its assets to make sure it does not fail as an energy giant in the industry.

Chevron Corporation Revenue Update

Due to the decrease in crude oil prices and higher depreciation and tax expenses, the energy sector's stock has seen a steep decline.

On Thursday the shares of the oil corporation declined by 1.55% and were being traded at a share price of $95.29 per share. This decline was due to the drop in oil prices as a number of other oil sectors stock also went down. In the third quarter of fiscal year 2015, the company recently reported revenue of $34 billion; in comparison to the estimates by the Wall Street analysts there was a difference of $9 million. The analysts had made an estimation of $26 billion for the revenue of the oil corporation for the third quarter. On a year over year basis the company’s revenue has fallen by 31% which was mainly due to the reason that prices of the crude oil also fell and according to reports by Market Realist, the revenue during the third quarter was mostly above $50 billion; this revenue was when the crude oil prices were on a high. Since the crude oil prices have fallen 21% on a year over year basis, it has affected Chevron’s stock. The drop in the crude oil prices did not only affect Chevron Corporation’s revenue in a negative but in a way seemed beneficial it the oil corporation as well, as the company’s downstream operations benefited from the decline and further provided better margins. On the other hand, the company, for the third quarter reported upstream earnings of $59 million while in the same quarter during the last fiscal year, the company had earnings upstream of $4.6 billion. Even though it has not performed well since the previous year but in comparison to the previous quarter of the current fiscal year, it has done better as the loss incurred in the 2nd quarter of 2015 was of $2.2 billion. This loss was again due to the low crude oil price as well as the higher depreciation and tax expenditures. But this is something that would be affecting all the energy sectors. Furthermore, the fall in the upstream earnings on a year to year basis reported by the company was 60%. After the company released its earnings for the third quarter, the Wall Street started their estimation for the next 12 months. According to the estimations and suggestions of the Wall Street analysts for the next 12 months, is that 41% of these experts recommend a “Buy” rating on the shares of the oil corporation while on the other hand 52% of these analysts are adding the stock to their list of “Hold” and finally 7% suggest a “sell”. A number of brokerage firms and financial services firms have covered Chevron’s stock, the consensus of these firms has come to the stock of the company being “neutral”. Barclay’s has suggest a rating of “Equal weight” with a target price of $96 and Goldman Sachs has rated the company “Sell/Neutral” with a target price of $81 per share. The average target price, after the suggestions of all these financial firms, has come down to $95.1.

Chesapeake Earnings Preview 3QFY15

The oil company is to report more losses in the upcoming earnings report where the analysts have turned rather bearish towards its stock.

Chesapeake Energy Corporation is one of those energy companies in the United States which has faced some serious series of ups and down on the stock index due to the increasing and decreasing oil prices in the international market, which is why the past few quarters for energy giants have been a little too difficult to manage. The recent events which have taken place on a global level with the demand of the crude oil falling in one of the most important buyer namely China also turned down the oil business on a huge level apart from the fact that the US has been having issues with the Saudis as well. All of these event have resulted in the crude oil falling from a per barrel value of $110 to a current price of $46, something which has raised great concerns of analysts and investors in the oil digging company. Oil and gas services provider, Chesapeake is, however, all set to announce its earnings to the market on Wednesday before the opening bell of the day and the expectations which have been circulating in the market have turned out to be rather on the negative side because the company seems to be working on a much lower level than it should have been, despite the uncertainty in the global market. The oil company has not only reported poor sales results in the last quarter but the fact that it has also experienced a dip on the index by a colossal 66.41% has turned out to be a rather bearish news for the investors to react on. The expected revenue for the coming quarter, according to the consensus estimations made by the Street analysts is to come around $2.95 billion. This shows that a dip is to be observed by the company where the revenue is concerned by 2.64% whereas if compared to the previous year, the loss will be come around 48.20%. The adjusted loss to be reported by the oil digging company is to come around at $0.13 and the EPS that was previously informed by the giant was noted down at $0.38. Around 34 analysts in the market have covered the Chesapeake stock and 21 of them have given it a ‘hold’ rating while 8 suggested a ‘sell’ rating to the shares.